COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the compensation committee recommended to the Pure Storage board of directors that the section titled "Compensation Discussion and Analysis" be incorporated by reference in Pure Storage’s Annual Report on Form 10-K for fiscal 2019 and included in this proxy statement.
The Compensation Committee
FRANK SLOOTMAN
(Chair)
SUSAN TAYLOR
PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
OUR EXECUTIVE OFFICERS
The following is biographical information for our named executive officers, as of the date of this proxy statement:
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CHARLES GIANCARLO
Chairman and Chief Executive Officer
Age:
61
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Charles Giancarlo
has served as our Chief Executive Officer and as a member of our board of directors since August 2017, and as our Chairman since September 2018. Mr. Giancarlo previously served as Managing Director, Head of Value Creation and later Senior Advisor at Silver Lake Partners, a private investment firm, from 2007 to 2015, where he focused on investment and business improvement opportunities for Silver Lake’s portfolio companies. From 2008 to 2009, Mr. Giancarlo served as Interim President and CEO of Avaya. Prior to that, from 1993 to 2007, Mr. Giancarlo served in senior executive roles at Cisco Systems, including Chief Technology Officer and Chief Development Officer and is credited with introducing many new technologies including Ethernet Switching, WiFi, IP Telephony and Telepresence. Mr. Giancarlo currently serves on the boards of directors of Arista Networks, Inc. and zScaler, Inc. Mr. Giancarlo previously served on the boards of directors of Accenture plc, Netflix, ServiceNow, Avaya, Imperva and Tintri. Mr. Giancarlo received a B.S. in Engineering from Brown University, a M.S. in Electrical Engineering from the University of California, Berkeley, and an M.B.A. from Harvard Business School. Mr. Giancarlo’s qualifications for board service include his extensive executive leadership and operational experience, as well as his relevant industry knowledge.
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JOHN COLGROVE
Founder and Chief Technology Officer
Age:
56
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John “Coz” Colgrove
has served as our Chief Technology Officer and as a member of our board of directors since founding Pure Storage in October 2009. In 2009, Mr. Colgrove served as an Entrepreneur in Residence at Sutter Hill Ventures, a venture capital firm. From 2005 to 2008, Mr. Colgrove served as a Fellow and Chief Technology Officer for the Datacenter Management Group of Symantec. Mr. Colgrove was one of the founding engineers and a Fellow at Veritas Software Corp., a provider of storage management solutions, which merged with Symantec in 2005. Mr. Colgrove earned his B.S. in Computer Science from Rutgers University and holds over 150 patents in the areas of system, data storage and software design. Mr. Colgrove’s qualifications for board service include his industry knowledge and his experience as a founder of Pure Storage, as well as his leadership experience and deep technical expertise.
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
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DAVID HATFIELD
President
Age:
51
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David Hatfield
has served as our President since January 2013. From 2007 to 2013, Mr. Hatfield served as Senior Vice President of Worldwide Sales, Marketing, Products and Services and President of SaaS at Limelight Networks, Inc., a digital presence management software company, where he was responsible for establishing their customer operations and global channel. From 2006 to 2007, Mr. Hatfield served as Vice President-General Manager of Professional Services for the Americas at Symantec and as Symantec’s Vice President of Sales from 2005 to 2006. From 2003 to 2005, Mr. Hatfield served as Vice President of Sales at Veritas Software. Mr. Hatfield earned a B.S. in Political Science from Santa Clara University.
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TIMOTHY RIITTERS
Chief Financial Officer
Age:
46
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Timothy Riitters
has served as our Chief Financial Officer since August 2014. From January 2010 to August 2014, Mr. Riitters served as Senior Director of Corporate Finance at Google, Inc., an internet technology company, where he was responsible for overseeing their annual planning and budget process. From 2007 to 2010, Mr. Riitters served as Director, EMEA Financial Operations at Google, and from 2004 to 2007, as Finance Process Manager. From 2002 to 2004, Mr. Riitters served as a Senior Product Manager at Siebel Systems, Inc., a software company. Mr. Riitters previously worked at Deloitte & Touche. Mr. Riitters is a certified public accountant (inactive) and earned a B.S. in Accounting from the University of Minnesota and an M.B.A. from Northwestern University.
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides an overview of the material elements of our executive compensation program for our executive officers during fiscal 2019 for the following “named executive officers,” whose compensation is set forth in the Summary Compensation Table and other compensation tables contained in this proxy statement. This section also discusses our executive compensation philosophy, objectives and design; how and why our compensation committee arrived at the specific compensation policies and decisions during fiscal 2019; the role of Compensia, our compensation committee’s independent compensation consultant; and the peer group used in evaluating executive compensation.
EXECUTIVE SUMMARY
Our compensation committee has adopted an executive compensation program designed to align our executive officers’ interests with those of our stockholders and to promote the creation of stockholder value without encouraging excessive or unnecessary risk-taking. The committee has tied a majority of our named executive officers’ compensation to key performance measures in order to drive the creation of stockholder value. Specifically, in addition to a base salary, our named executive officers’ total compensation includes annual short-term and long-term incentive compensation that is based on our attainment of pre-established financial performance objectives. Our executive compensation program plays a significant role in our ability to attract and retain an experienced, successful executive team.
FISCAL 2019 BUSINESS AND FINANCIAL HIGHLIGHTS
In fiscal 2019, we achieved significant financial and business results, including:
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REVENUES
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TOTAL CUSTOMER COUNT
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(in billions)
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(in millions)
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ü
We increased our revenues from $1.02 billion in fiscal 2018 to $1.36 billion in fiscal 2019, an increase of 33% year over year;
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We grew international revenue from 26% of revenue in fiscal 2018 to 28% of revenue in fiscal 2019;
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We exceeded our operating margin guidance for the full year; and
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We continued our industry-leading delivery of important new products opening up new markets.
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FISCAL 2019 EXECUTIVE COMPENSATION HIGHLIGHTS
In fiscal 2019, we continued to emphasize a “pay for performance” philosophy. The key highlights of our fiscal 2019 executive compensation program included:
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UPDATED PEER GROUP
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BASE SALARY AND BONUS TARGETS
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EQUITY BASED ON PERFORMANCE
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BONUS BASED ON PERFORMANCE
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We updated our compensation peer group to ensure our executive compensation is comparable and competitive relative to similar companies.
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We increased aggregate base salaries and target bonuses for our executive officers, by a range of 0% to 23%.
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We granted equity awards to our executive officers that were entirely dependent on our performance as measured by an annual revenue metric, shifting from half time-based and half performance-based awards in fiscal 2018, to 100% performance-based awards in fiscal 2019.
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We set cash bonus targets based on annual revenue and profit metrics for fiscal 2019, rather than only a quarterly revenue metric as used in fiscal 2018. In fiscal 2019, we exceeded our revenue and profit targets and paid bonuses based on this performance.
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
2018 STOCKHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION
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At our annual meeting held in June 2018, we held a non-binding advisory vote on the compensation of our named executive officers (a
Say-on-Pay
vote). Our stockholders approved the fiscal 2018 compensation of our named executive officers, with over 99% of the votes cast in favor of our fiscal 2018 compensation program. By the time this vote was conducted, all of the decisions relating to the compensation of our named executive officers for fiscal 2019 had already been made. For example, cash and equity compensation for fiscal 2019 was determined in March 2018. As a result, the Say-on-Pay vote did not have a significant impact on our fiscal 2019 compensation program. However, in the context of our overall compensation philosophy, policies and decisions, and in determining subsequent compensation for our executive officers, the compensation committee has considered, and intends to continue to consider, the results of the annual Say-on-Pay vote.
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DISCUSSION OF OUR EXECUTIVE COMPENSATION PROGRAM
COMPENSATION PHILOSOPHY AND OBJECTIVES
We design our executive compensation program to achieve the following objectives, consistent with our “pay for performance” philosophy:
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attract, motivate and retain executive officers of outstanding ability and potential to grow our business;
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motivate and reward behavior that results in exceeding our corporate performance objectives; and
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ensure that compensation is meaningfully tied to the creation of stockholder value.
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We believe that our executive compensation program should include short-term and long-term elements and reward consistent performance that meets or exceeds expectations. We evaluate both performance and compensation to ensure that the compensation provided to our executive officers remains competitive relative to the compensation paid by similar companies operating in the technology industry, in particular comparable software and hardware companies, taking into account the role and performance of the individual executive officer and the performance and strategic objectives of Pure Storage.
COMPENSATION DESIGN
The compensation arrangements for our executive officers consist of base salary, performance-based cash bonuses, performance-based equity awards, and broad-based welfare and health benefit programs. Our cash bonuses are funded based on annual corporate performance metrics, though our compensation committee reserves the right to apply discretion to increase or decrease a payout based on individual performance of an executive officer during the applicable year. While we offer cash compensation in the form of base salaries and cash bonuses, we intend equity compensation to be the central element of our executive compensation program.
We emphasize the use of equity compensation to provide incentives for our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create value for our stockholders. In fiscal 2018, we started to broadly use full value equity awards in our executive compensation program, including time-based equity awards that typically vest over multi-year periods and performance-based equity awards that may only be earned upon the achievement of company performance objectives. In fiscal 2019, we continued shifting toward greater emphasis on pay for performance, granting equity awards to our executive officers that were entirely dependent on our corporate performance. We believe that performance-based equity awards align the interests of our executive officers with our stockholders and drive a longer-term focus through a multi-year vesting schedule.
Our compensation committee reviews our executive compensation program at least annually. As part of this review process, our compensation committee applies the objectives described above within the context of our overall compensation philosophy while simultaneously considering the compensation levels needed to ensure our executive compensation program remains competitive. Our compensation committee also evaluates whether we are meeting our retention objectives and the potential cost of replacing key executive officers.
PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
COMPENSATION-SETTING PROCESS
Our compensation committee is responsible for reviewing, evaluating and approving the compensation arrangements of our executive officers and for establishing and maintaining our executive compensation policies and practices. Our compensation committee seeks input and receives recommendations from members of our executive team when discussing the performance and compensation of other executive officers, and in determining the financial and accounting implications of our compensation programs and hiring decisions. Our compensation committee is authorized to engage its own independent advisors to provide advice on matters related to executive compensation and general compensation programs. For additional information on our compensation committee, see “Board Structure and Process—Board Committees” elsewhere in this proxy statement.
ROLE OF OUR EXECUTIVE OFFICERS
In fiscal 2019, our CEO and Chief Human Resources Officer assisted our compensation committee in evaluating the performance of our executive officers (other than their own performance), and making recommendations to our compensation committee with respect to base salary adjustments, target cash bonus opportunities, actual bonus payments and equity awards for each executive officer. While our compensation committee takes these recommendations into consideration, it exercises its own independent judgment in approving the compensation of our executive officers.
ROLE OF COMPENSATION CONSULTANT
In fiscal 2019, our compensation committee retained Compensia to provide advice regarding our executive compensation program. Pursuant to this engagement, Compensia performed the following projects for our compensation committee:
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assisted in the development of the updated compensation peer group that we use to understand competitive market compensation practices;
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provided compensation data and analysis of our executive compensation program, comparing our program to those of companies in our compensation peer group; and
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conducted a compensation risk assessment and a review of our compensation philosophy.
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Compensia does not provide any other services to us. Compensia maintains a conflict of interest policy that is specifically designed to prevent any conflicts of interest. In addition, our compensation committee has assessed the independence of Compensia taking into account, among other things, the factors set forth in Exchange Act rules and the listing standards of the NYSE, and concluded that no conflict of interest exists with respect to Compensia’s engagement by our compensation committee.
COMPENSATION PEER GROUP
Our compensation committee generally refers to peer group data when reviewing our executive officers’ compensation. This compensation peer group is intended to reflect companies that are in applications software, systems software, internet software and services or information technology sectors, with similar revenues, significant revenue growth, headcount and mid-level market capitalization. In preparation for fiscal 2019, our compensation committee, in consultation with Compensia, evaluated our compensation peer group and made adjustments, removing companies that had been acquired during the previous 12 months and adding other technology companies of comparable size with which we may compete for talent. This compensation peer group was generally selected based on companies with revenues of 0.5 to 2.5 times our annual revenues, as well as market capitalizations of 0.25 to 4.0 times our market capitalization. We also sought to include companies with revenue growth of greater than 20% where possible, though we had a higher year-over-year revenue growth rate relative to the compensation peer group. We retained Arista Networks and Palo Alto Networks in our peer group, as our compensation committee believed that these companies aligned well with the direction of our underlying business fundamentals.
Our compensation peer group for fiscal 2019 consisted of the following companies:
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Arista Networks
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GTT Communications
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Nutanix
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Tableau Software
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Box
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Guidewire Software
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Palo Alto Networks
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Ubiquiti Networks
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Cornerstone OnDemand
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j2 Global
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Proofpoint
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Ultimate Software Group
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FireEye
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LogMeIn
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RingCentral
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Zendesk
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Fortinet
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New Relic
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Splunk
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our compensation committee considers the compensation levels of the executives at the companies in our compensation peer group to provide general guidance and a reference for market practices, without rigidly setting compensation based on specific percentiles relative to the peer group.
ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program consists of three principal elements:
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long-term incentive compensation in the form of equity awards.
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The following charts show the pay mix for our CEO and, on average, our named executive officers for fiscal 2019 (based on the values reported in the Summary Compensation Table):
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AVERAGE OF ALL OTHER NEOs % OF TOTAL
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BASE SALARY
We offer base salaries that are intended to provide a stable level of fixed compensation to our executive officers for performance of their day-to-day responsibilities. Each executive officer’s base salary was originally established as the result of arm’s-length negotiations with each individual at the time of his initial hiring. Base salaries for our executive officers are reviewed annually to determine whether an adjustment is warranted. In February 2018, our compensation committee reviewed the base salaries of our executive officers and, after considering an analysis performed by Compensia, decided to increase the base salaries of some of our executive officers to keep their target total cash compensation competitive with our compensation peer group and to bring salary and bonus factors more in-line with the ranges of similarly situated executives at the companies in our compensation peer group. These increases were effective as of March 1, 2018. The following table sets forth the annual base salaries for our named executive officers:
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Name
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Prior Base Salary ($)
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New Base Salary ($)
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Percentage Increase
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Charles Giancarlo
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500,000
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500,000
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0
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%
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John Colgrove
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300,000
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325,000
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8
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%
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David Hatfield
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325,000
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365,000
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12
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%
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Timothy Riitters
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330,000
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360,000
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9
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%
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
CASH BONUSES
We provide our executive officers the opportunity to earn periodic cash bonuses, in the same form available to many of our employees. These cash bonuses are intended to encourage the achievement of corporate performance objectives, particularly corporate financial targets. In February 2018, our compensation committee reviewed the target cash bonus opportunities of our executive officers and, after considering an analysis performed by Compensia, decided to increase the target cash bonus opportunities for some of our executive officers to keep their target total cash compensation opportunities competitive with compensation provided by companies in our compensation peer group and to bring salary and bonus factors more in-line with the ranges of similarly situated executives at the companies in our compensation peer group. These increases were effective as of March 1, 2018. The following table sets forth the revised annual target cash bonuses opportunities for our named executive officers:
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Name
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Prior Target Bonus ($)
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New Target Bonus ($)
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Percentage Increase
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Charles Giancarlo
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500,000
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500,000
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0
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%
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John Colgrove
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200,000
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260,000
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30
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%
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David Hatfield
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325,000
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365,000
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12
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%
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Timothy Riitters
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170,000
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252,000
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48
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%
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In addition, we made several changes to our bonus program. In fiscal 2018, the performance objectives for bonuses paid to our executive officers were tied to quarterly revenue targets. Our executive officers were eligible to earn a cash bonus payment each fiscal quarter during which they were employed to the extent that we achieved at least 80% of the revenue target for such quarter. In fiscal 2019, we continued to enhance our bonus program to strengthen the link between pay and performance by introducing a non-GAAP operating profit margin metric and target for the full year, in addition to a full year revenue target. In addition to these financial performance measures, our compensation committee may consider individual performance in ultimately setting our executives’ overall bonus payouts. After the second quarter of fiscal 2019, we also shifted from paying bonuses quarterly to semi-annually, with the first semi-annual bonus payment being made for the second half of fiscal 2019. In fiscal 2019, this meant that 25% of the target bonus opportunity was paid in each of May and August 2018, and became non-recoverable by the company, and the other 50% of the target bonus opportunity, plus any payment for over-performance, if any, was paid in March 2019.
For fiscal 2019, our compensation committee decided to fund the overall bonus pool based 75% on an annual revenue objective and 25% on an annual operating margin objective, though bonus payment amounts would ultimately be determined by our compensation committee, in its discretion. Further, fiscal 2019 bonus pool funding would be made only if we achieved at least 80% of our fiscal 2019 revenue target. Further, the portion of our bonus pool funding dependent on operating margin would only fund if we achieved at least 100% of our fiscal 2019 revenue target.
We exceeded our fiscal 2019 revenue target, delivering $1.360 billion against a target of $1.335 billion. In addition, we exceeded our fiscal 2019 operating margin objective (non-GAAP), delivering 3.7% against a target of 2.0%. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenue, excluding the effects of stock-based compensation expense, payroll tax expense related to stock-based activities and amortization expense of acquired intangible assets. A reconciliation of this measure can be found in exhibit 99.1 to the current report on Form 8-K furnished to the SEC on February 28, 2019.
Based on corporate achievement, our compensation committee determined and approved full year bonus payments equal to 110% of the target bonus for each of our executive officers. This payout level reflected the moderate over-performance with respect to fiscal 2019 revenue and operating margin objectives. Our compensation committee did not apply discretion to increase the bonus payouts based on individual performance.
The following table provides information regarding the bonus payment levels achieved and the actual cash bonuses earned by our named executive officers during our fiscal 2019 bonus periods:
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Name
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Target Bonus ($)
(1)
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Payment Percentage
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Actual Bonus Earned ($)
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Charles Giancarlo
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500,000
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110
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%
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550,000
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John Colgrove
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255,397
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110
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%
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280,937
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David Hatfield
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361,932
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110
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%
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398,125
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Timothy Riitters
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245,710
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110
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%
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270,281
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(1)
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Prorated based on the March 1, 2018 effective date for any change to target cash bonus opportunity, if applicable
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
EQUITY COMPENSATION
We believe that strong long-term corporate performance is achieved with a compensation program that encourages a long-term focus by our executive officers through the use of equity compensation, the value of which depends on the performance of our common stock. For this reason, our long-term incentive compensation to date has been provided largely in the form of equity awards. Historically, we have used stock options and restricted stock units as the primary forms of equity incentive compensation to help align the interests of our executive officers with the interests of our stockholders and to enable them to participate in the appreciation of our common stock.
The size and form of the equity awards for our executive officers are determined in the discretion of our compensation committee at a level that it believes is competitive with current market conditions (as reflected by our compensation peer group), and after taking into consideration each individual executive officer’s role and the scope of his or her responsibilities, experience, past performance, and expected future contributions, current equity holdings and the potential equity awards of our other executive officers.
Prior to fiscal 2018, our executive officers’ equity awards generally were subject to a time-based vesting requirement. In fiscal 2018, our compensation committee approved the grant of stock awards to our executive officers that included both time-based vesting equity and performance-based vesting equity requirements. In fiscal 2019, our compensation committee continued to enhance the structure of our executive officers’ equity awards and began grating performance-based stock awards in order to better align our executive officers' financial incentives with company performance and the creation of stockholder value.
In February 2018, our compensation committee reviewed the outstanding equity awards held by our executive officers and considered an analysis performed by Compensia, as well as factors such as the unvested equity awards held by most of our executive officers and the price of our common stock.
Based on that review, our compensation committee granted performance-based stock awards to our executive officers in March 2018 that were subject to performance-based vesting requirements, with the earned share amount to be adjusted up or down from 0% to 180% of the target share amount, based on our achievement of the annual revenue target of $1.335 billion for fiscal 2019, and the earned shares, if any, subject to an additional time-based vesting requirement. The earned performance-based shares vest over a three-year period, with 1/3rd vesting in March 2019 and the remainder vesting quarterly thereafter.
These performance-based stock awards are set forth in the following table.
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Name
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Target Shares
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Maximum Shares
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Vesting Commencement Date
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Charles Giancarlo
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347,053
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624,695
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March 20, 2018
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John Colgrove
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140,318
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252,572
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March 20, 2018
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David Hatfield
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140,318
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252,572
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March 20, 2018
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Timothy Riitters
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152,011
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273,620
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March 20, 2018
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The target number of shares granted under the equity awards that were eligible to be earned was based on our performance against our revenue target of $1.335 billion for fiscal 2019, as set by our compensation committee in March 2018. Our compensation committee selected revenue as the appropriate corporate performance measure for the equity awards because, in its view, this metric was the best indicator of our successful execution of our top-line growth strategy.
For purposes of the equity awards, our executive officers were eligible to earn the shares of our common stock subject to these awards to the extent that we achieved at least 70% of the revenue target for fiscal 2019 as determined after the end of fiscal 2019, as follows:
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If we achieved less than 70% of the revenue target for fiscal 2019, no shares would be earned;
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If we achieved from 70% to 120% of the revenue target for fiscal 2019, target shares ranging from 50% to 180% would be earned; and
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If we achieved 120% or more of the revenue target for fiscal 2018, a maximum of 180% of the target shares would be earned.
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PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
The following chart presents potential metric payout multiples relative to fiscal 2019 revenue target.
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Percentage of
Revenue Target
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Fiscal 2019 Revenues
(in millions)
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Payout Multiple
Relative to Target
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Max
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120%
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$1,602 or more
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180
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%
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110%
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$1,469
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140
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%
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Target
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100%
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$1,335
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100
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%
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85%
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$1,135
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75
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%
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70%
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$935
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50
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%
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Threshold
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Less than 70%
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Less than $935
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0
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%
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In March 2019, our compensation committee determined that, based on our fiscal 2019 revenue of approximately $1.360 billion, we achieved 102% achievement of the revenue target for fiscal 2019, and therefore 108% of the shares subject to the performance-based awards had been earned, as follows:
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Name
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Target Shares
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Percentage of
Revenue Target
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Payout Multiple
Relative to Target
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Earned Shares
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Charles Giancarlo
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347,053
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102
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%
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108
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%
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374,817
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John Colgrove
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140,318
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102
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%
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108
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%
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151,543
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David Hatfield
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140,318
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102
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%
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108
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%
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151,543
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Timothy Riitters
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152,011
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102
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%
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108
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%
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164,172
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The shares of our common stock earned pursuant to the equity awards were subject to a time-based vesting requirement, with 1/3rd of the total number of earned shares vesting on March 20, 2019 and the remainder vesting quarterly thereafter, subject to the executive officer’s continuous service with us on each such vesting date. All unearned shares were automatically forfeited upon the determination of achievement by our compensation committee.
The equity awards granted to our executive officers during fiscal 2019 are set forth in the “Summary Compensation Table” and the “Grants of Plan-Based Awards Table” below.
CEO’S NEW HIRE PERFORMANCE-BASED EQUITY AWARD
In February 2019, our compensation committee also reviewed Mr. Giancarlo’s CEO new hire performance-based equity award from August 2017, which had a target of 464,744 shares, to be earned based on the achievement of the same revenue target of $1.335 billion for fiscal 2019, as established by our compensation committee in March 2018. 50% of the target shares would be earned upon achievement of 80% of the fiscal 2019 revenue target, and additional amounts will be earned on a proportional basis up to 120% achievement of the fiscal 2019 revenue target, or up to a maximum of 150% of the target shares. Once earned, this award would be subject to additional time-based vesting with 1/3rd of the shares subject to the award being deemed earned as of December 20, 2018 and the remainder vesting quarterly over the following eight quarters until December 20, 2020, subject to Mr. Giancarlo’s continuous service on each such vesting date.
Our compensation committee determined that, based on our fiscal 2019 revenue of approximately $1.360 billion, we achieved 102% achievement of the revenue target for fiscal 2019, and therefore 104.65% of the shares under Mr. Giancarlo’s CEO new hire performance-based award had been earned, or a total of 486,355 shares, of which 162,118 were deemed earned as of December 20, 2018, to be released in March 2019, and 324,237 shares remained subject to further time-based vesting through December 2020 as previously described.
BENEFITS PROGRAMS
Our employee benefit programs, including our 401(k) plan, employee stock purchase plan, and health, and welfare programs, are designed to provide a competitive level of benefits to our employees generally, including our executive officers and their families. We adjust our employee benefit programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Our executive officers are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other U.S. full-time employees.
PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
PERQUISITES AND OTHER PERSONAL BENEFITS
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not generally provide perquisites to our executive team. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive in the performance of his or her duties, to make our executive team more efficient and effective and for recruitment, motivation or retention purposes. All future practices with respect to perquisites or other personal benefits will be subject to review and approval by our compensation committee.
POST-EMPLOYMENT COMPENSATION
Our executive officers and certain other employees are eligible to receive severance payments, equity acceleration and health care benefits in the event of a termination of employment in connection with a change in control of Pure Storage. Our compensation committee has determined that these arrangements are both competitively reasonable and necessary to recruit and retain key executives. The material terms of these post-employment payments to our named executive officers are set forth below in the section titled “Employment, Severance and Change in Control Agreements.”
OTHER COMPENSATION POLICIES
EQUITY AWARDS GRANT POLICY
Equity awards to our executive officers or members of our board of directors must be approved either by our board of directors or our compensation committee at a meeting or by unanimous written consent. Our compensation committee has adopted a policy governing equity awards that are granted to our non-executive employees. This policy provides that our CEO may approve awards to non-executive employees within prescribed limits. Generally, equity awards will be effective on the 20th day of the second month of the fiscal quarter. The exercise price of all stock options and stock appreciation rights must be equal to or greater than the fair market value of our common stock on the date of grant.
DERIVATIVES TRADING, PLEDGING AND HEDGING POLICY
Our insider trading policy prohibits the trading of derivatives or the pledging or hedging of our equity securities by our employees, including our executive officers and the members of our board of directors.
COMPENSATION CLAWBACK/RECOUPMENT
Awards granted under our 2015 Equity Incentive Plan (the
2015 Plan
) will be subject to recoupment in accordance with any clawback policy that we are required to adopt pursuant to the listing standards of the NYSE or as otherwise required by applicable law. In addition, our compensation committee may impose other clawback, recovery or recoupment provisions in an award agreement as our compensation committee determines necessary or appropriate. We will comply with the requirements of the Dodd-Frank Act and adopt a compensation recovery policy once the SEC adopts final regulations on this subject.
POLICY REGARDING 10b5-1 PLANS FOR DIRECTORS AND EXECUTIVE OFFICERS
Our insider trading policy generally requires that our executive officers and members of our board of directors may not trade in our equity securities during “blackout” periods and that such individuals must pre-clear trades or adopt plans in accordance with Exchange Act Rule 10b5-1 for sales of securities which they beneficially own.
COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT
Our compensation committee has reviewed our executive and employee compensation programs, and does not believe that our compensation policies and practices encourage undue or inappropriate risk taking or create risks that are reasonably likely to have a material adverse effect on us. The reasons for our compensation committee’s determination include the following:
|
|
•
|
We structure our compensation programs to consist of both fixed and variable components. The fixed (or base salary) component of our compensation programs is designed to provide income independent of our stock price performance so that employees will not focus exclusively on stock price performance to the detriment of other important business metrics.
|
|
|
•
|
We maintain internal controls over the measurement and calculation of financial information, which are designed to prevent this information from being manipulated by any employee, including our executive officers.
|
PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
|
|
•
|
We do not cap the cash incentive award for our sales commission plans to provide maximum incentive for our sales force to meet and exceed their revenue objectives. However, we do maintain internal controls over the determination of sales commissions.
|
|
|
•
|
Employees of Pure Storage are required to comply with our code of conduct, which covers, among other things, accuracy in keeping financial and business records.
|
|
|
•
|
Our compensation committee approves the overall annual equity pool and the employee equity award guidelines.
|
|
|
•
|
A significant portion of the compensation paid to our executive officers is in the form of equity to align their interests with the interests of stockholders.
|
|
|
•
|
As part of our insider trading policy, we prohibit hedging transactions involving our securities so that our executive officers and other employees cannot insulate themselves from the effects of poor stock price performance.
|
TAX AND ACCOUNTING CONSIDERATIONS
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Under Section 162(m) of the Code (
Section 162(m)
), compensation paid to any publicly held corporation’s "covered employees" that exceeds $1 million per taxable year for any covered employee is generally non-deductible.
However, Section 162(m) provides a reliance period exception, pursuant to which the deduction limit under Section 162(m) does not apply to certain compensation paid (or in some cases, granted) pursuant to a plan or agreement that existed during the period in which the corporation was not publicly held, subject to certain requirements and limitations. Under Section 162(m), this reliance period ends upon the earliest of the following: (i) the expiration of the plan or agreement; (ii) the material modification of the plan or agreement; (iii) the issuance of all employer stock and other compensation that has been allocated under the plan; or (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the corporation’s initial public offering occurs. However, the reliance period exception under Section 162(m) may be repealed or modified in the future as a result of certain changes that were made to Section 162(m) pursuant to the Tax Cuts and Jobs Act.
In addition, prior to the enactment of the Tax Cuts and Jobs Act, Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as "performance-based compensation" under Section 162(m). Pursuant to the Tax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 and which is not modified in any material respect on or after such date.
Compensation paid to each of the Company’s "covered employees" in excess of $1 million per taxable year generally will not be deductible unless it qualifies for (i) the reliance period exception under Section 162(m) or (ii) the performance-based compensation exception under Section 162(m) pursuant to the transition relief described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by the Company will qualify for the reliance period exception under Section 162(m) or will be eligible for such transition relief and be deductible by the Company in the future. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit under Section 162(m). The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.
NO TAX REIMBURSEMENT OF PARACHUTE PAYMENTS AND DEFERRED COMPENSATION
We did not provide any executive officer, including any named executive officer, with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999, or 409A of the Code during fiscal 2019, and we have not agreed and are not otherwise obligated to provide any named executive officer with such a “gross-up” or other reimbursement.
PROPOSAL 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION
ACCOUNTING TREATMENT
We account for stock-based compensation in accordance with the authoritative guidance set forth in ASC Topic 718, which requires companies to measure and recognize the compensation expense for all share-based awards made to employees and directors, including stock options and full-value equity awards, over the period during which the award recipient is required to perform services in exchange for the award (for executive officers, generally the three-year or four-year performance and/or vesting period of the award). Compensation expense for shares acquired through our ESPP is recognized over the offering period. We estimate the fair value of stock options and shares acquired through our ESPP using the Black-Scholes option pricing model. This calculation is performed for accounting purposes and reported in the compensation tables below.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE FOR FISCAL 2019
The following table presents all of the compensation awarded to, or earned by, our named executive officers during fiscal 2019 and the prior two fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
|
Option Awards
($)
(1)
|
|
Stock
Awards
($)
(1)
|
|
Non–Equity
Incentive Plan
Compensation
($)
(2)
|
|
All Other
Compensation
($)
(3)
|
|
Total
($)
|
|
Charles Giancarlo
(4)
|
2019
|
500,000
|
|
—
|
|
7,333,230
|
|
550,000
|
|
—
|
|
8,383,230
|
|
Chief Executive Officer
|
2018
|
222,222
|
|
5,580,000
|
|
11,934,639
|
|
229,416
|
|
—
|
|
17,966,277
|
|
John Colgrove
|
2019
|
322,917
|
|
—
|
|
2,964,919
|
|
280,937
|
|
—
|
|
3,568,773
|
|
Chief Technology Officer
|
2018
|
295,833
|
|
—
|
|
1,122,764
|
|
212,500
|
|
14,717
|
|
1,645,814
|
|
|
2017
|
250,000
|
|
—
|
|
—
|
|
183,800
|
|
11,053
|
|
444,853
|
|
David Hatfield
|
2019
|
361,667
|
|
—
|
|
2,964,919
|
|
398,125
|
|
—
|
|
3,724,711
|
|
President
|
2018
|
322,917
|
|
—
|
|
2,406,764
|
|
345,313
|
|
11,208
|
|
3,086,201
|
|
|
2017
|
300,000
|
|
—
|
|
—
|
|
256,109
|
|
—
|
|
556,109
|
|
Timothy Riitters
|
2019
|
357,500
|
|
—
|
|
3,211,992
|
|
270,281
|
|
—
|
|
3,839,773
|
|
Chief Financial Officer
|
2018
|
329,167
|
|
—
|
|
4,058,057
|
|
177,164
|
|
—
|
|
4,564,388
|
|
|
2017
|
320,000
|
|
—
|
|
501,200
|
|
136,565
|
|
—
|
|
957,765
|
|
|
|
(1)
|
The amount shown in this column does not reflect the dollar amount actually received by our named executive officers. Instead, this amount reflects the aggregate grant date fair value of the stock option and stock awards granted to our named executive officers, computed in accordance with the provisions of FASB ASC Topic 718. Assumptions used in the calculation of this amount are included in the notes to our consolidated financial statements in our Annual Report on Form 10-K, as filed with the SEC on March 26, 2019, except that amounts for performance-based stock awards are based on the aggregate fair value as of the grant date given that the applicable performance criteria was established after the end of the applicable fiscal year. The amounts reported for performance-based stock awards are reported at 100% target achievement. See “Compensation Discussion and Analysis” above for the share amounts actually earned in fiscal 2019.
|
|
|
(2)
|
Represents bonuses earned by our named executive officers under our cash bonus program for employees. The amounts reported represent cash bonuses earned by each named executive officer based on the achievement of corporate revenue targets and, in the case of fiscal 2019, operating profit margin targets, and the individual’s target bonus amount. Prior to the second half of fiscal 2019, the cash bonuses were paid quarterly, and beginning with the second half of fiscal 2019, the cash bonuses were paid semi-annually, based on the achievement of the corporate performance targets described above. The amount reflected for fiscal 2017 for Mr. Hatfield represent sales commissions earned by him.
|
|
|
(3)
|
Includes: (i) with respect to Mr. Colgrove’s fiscal 2018 amount, (a) $7,895 in amounts associated with our patent award program, (b) $4,500 in employer contributions to his health savings account, and (c) $2,322 in life insurance premiums; (ii) with respect to Mr. Colgrove’s fiscal 2017 amount, (a) $5,474 in amounts associated with our patent award program, (b) $4,500 in employer contributions to his health savings account, and (c) $1,079 in life insurance premiums; (iii) with respect to Mr. Hatfield’s fiscal 2018 amount, (a) $5,862 in travel expenses associated with his spouse attending a company-sponsored event, (b) $4,500 in employer contributions to his health savings account, and (c) $846 in life insurance premiums.
|
|
|
(4)
|
Mr. Giancarlo was appointed as our CEO on August 22, 2017.
|
GRANTS OF PLAN–BASED AWARDS TABLE IN FISCAL 2019
The following table presents information regarding each grant of a cash or equity award made during fiscal 2019. This information supplements the information about these awards set forth in the “Summary Compensation Table” above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
Grant Date
Fair Value of
Stock Awards
($)
(1)
|
|
Name
|
Grant Date
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Charles Giancarlo
|
2/17/2018
(2)
|
—
|
|
500,000
|
|
928,125
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/13/2018
(3)
|
—
|
|
—
|
|
—
|
|
|
—
|
|
347,053
|
|
624,695
|
|
7,333,230
|
|
John Colgrove
|
2/17/2018
(2)
|
—
|
|
260,000
|
|
482,625
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/13/2018
(3)
|
—
|
|
—
|
|
—
|
|
|
—
|
|
140,318
|
|
252,572
|
|
2,964,919
|
|
David Hatfield
|
2/17/2018
(2)
|
—
|
|
363,000
|
|
673,819
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/13/2018
(3)
|
—
|
|
—
|
|
—
|
|
|
—
|
|
140,318
|
|
252,572
|
|
2,964,919
|
|
Timothy Riitters
|
2/17/2018
(2)
|
—
|
|
252,000
|
|
467,775
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/13/2018
(3)
|
—
|
|
—
|
|
—
|
|
|
—
|
|
152,011
|
|
273,620
|
|
3,211,992
|
|
|
|
(1)
|
The amount shown in this column does not reflect the dollar amount actually received by our named executive officers. Instead, this amount reflects the aggregate grant date fair value of the stock awards granted to our named executive officers, computed in accordance with the provisions of FASB ASC Topic 718. Assumptions used in the calculation of this amount are included in the notes to our consolidated financial statements in our Annual Report on Form 10-K, as filed with the SEC on March 26, 2019.
|
|
|
(2)
|
The target bonus amounts for fiscal 2019 were established by our compensation committee in February 2018, with the changes effective as of March 1, 2018. For further information regarding the fiscal 2019 target cash bonuses, please see the “Compensation Discussion and Analysis-Cash Bonuses” above, with the actual amounts earned and paid as set forth in the “Summary Compensation Table” in the column titled “Non-Equity Incentive Plan Compensation.”
|
|
|
(3)
|
The shares under this performance-based stock award are reported at 100% target achievement and will be earned, from 0% to 180%, based on the achievement of a revenue target for fiscal 2019, which was established by our compensation committee in March 2018. Once earned, this award will be subject to time-based vesting, with 1/3rd of the shares vesting on March 20, 2019 and the remaining earned shares subject to the award vesting over the following eight quarters of the named executive officer’s continuous service. See “Compensation Discussion and Analysis” above for the share amounts actually earned in fiscal 2019.
|
OUTSTANDING EQUITY AWARDS AS OF JANUARY 31, 2019
The following table presents information regarding outstanding equity awards held by our named executive officers as of January 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
(1)
|
|
Stock Awards
(1)
|
Name
|
Vesting
Commencement
Date
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
|
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)
(2)
|
|
Charles Giancarlo
|
08/22/2017
(3)
|
|
177,083
|
|
322,917
|
|
12.84
|
|
8/22/2027
|
|
|
—
|
|
—
|
|
|
08/22/2017
(3)
|
|
177,083
|
|
322,917
|
|
17.00
|
|
8/22/2027
|
|
|
—
|
|
—
|
|
|
09/20/2017
(4)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
319,513
|
|
5,722,478
|
|
|
—
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
464,744
|
|
8,323,565
|
|
|
—
(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
347,053
|
|
6,215,719
|
|
John Colgrove
|
04/01/2018
(7)
|
|
225,000
|
|
375,000
|
|
2.98
|
|
3/28/2024
|
|
|
—
|
|
—
|
|
|
01/01/2020
(8)
|
|
—
|
|
83,333
|
|
17.00
|
|
9/23/2025
|
|
|
—
|
|
—
|
|
|
01/01/2021
(8)
|
|
—
|
|
125,000
|
|
17.00
|
|
9/23/2025
|
|
|
—
|
|
—
|
|
|
—
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
25,002
|
|
871,498
|
|
|
—
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
24,809
|
|
1,161,997
|
|
|
—
(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
140,318
|
|
2,513,095
|
|
David Hatfield
|
—
|
|
452,112
|
|
—
|
|
1.23
|
|
2/6/2023
|
|
|
—
|
|
—
|
|
|
—
|
|
300,109
|
|
—
|
|
2.58
|
|
1/30/2024
|
|
|
—
|
|
—
|
|
|
01/01/2018
(10)
|
|
235,646
|
|
250,000
|
|
2.98
|
|
3/28/2024
|
|
|
—
|
|
—
|
|
|
02/15/2020
(8)
|
|
—
|
|
150,000
|
|
13.20
|
|
3/17/2025
|
|
|
—
|
|
—
|
|
|
03/15/2021
(11)
|
|
—
|
|
75,000
|
|
17.00
|
|
9/23/2025
|
|
|
—
|
|
—
|
|
|
—
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
25,002
|
|
447,786
|
|
|
—
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
24,809
|
|
444,329
|
|
|
—
(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
140,318
|
|
2,513,095
|
|
Timothy Riitters
|
—
|
|
808,500
|
|
0
|
|
9.65
|
|
10/8/2024
|
|
|
—
|
|
—
|
|
|
08/26/2018
(12)
|
|
72,916
|
|
277,084
|
|
9.65
|
|
10/8/2024
|
|
|
—
|
|
—
|
|
|
09/15/2020
(8)
|
|
—
|
|
75,000
|
|
13.20
|
|
3/17/2025
|
|
|
—
|
|
—
|
|
|
01/01/2020
(8)
|
|
—
|
|
27,500
|
|
17.00
|
|
9/23/2025
|
|
|
—
|
|
—
|
|
|
01/01/2021
(8)
|
|
—
|
|
32,500
|
|
17.00
|
|
9/23/2025
|
|
|
—
|
|
—
|
|
|
—
(13)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
18,210
|
|
326,141
|
|
|
04/05/2019
(14)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
55,650
|
|
996,692
|
|
|
—
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
50,001
|
|
895,518
|
|
|
—
(6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
152,011
|
|
2,722,517
|
|
|
|
(1)
|
The unvested shares subject to these awards may be subject to accelerated vesting upon a qualifying termination of employment, as described in the section titled “Employment, Severance and Change in Control Agreements.” All option awards were granted under our 2009 Equity Incentive Plan, and all stock awards were granted under our 2015 Equity Plan.
|
|
|
(2)
|
This amount is calculated by multiplying the number of unvested shares held by the applicable named executive officer by the closing price of our common stock on the NYSE on January 31, 2019 (the last day of our fiscal year), which was $17.91 per share.
|
|
|
(3)
|
125,000 options vested on August 22, 2018, with the remaining 375,000 options vesting in 36 equal monthly installments subject to Mr. Giancarlo’s continuous service.
|
|
|
(4)
|
116,186 shares vested on September 20, 2018, with the remaining 348,559 shares vesting in 12 equal quarterly installments, subject to Mr. Giancarlo’s continuous service.
|
|
|
(5)
|
The shares under this award are reported at target and were to be earned, from 0% to 150%, based on the achievement of a revenue target for fiscal 2019, which was determined by our compensation committee in February 2019, and remain subject to time-based vesting, with 1/3rd vesting on December 20, 2018 and the remaining earned shares subject to the award vesting quarterly over the following eight quarters on the 20th day of the second month of each fiscal quarter thereafter, subject to Mr. Giancarlo's continuous service.
|
|
|
(6)
|
The shares under this award are reported at target and were to be earned, from 0% to 180%, based on the achievement of a revenue target for fiscal 2019, which was determined by our compensation committee in February 2019, and remained subject to time-based vesting, with 1/3rd vesting on March 20, 2019, and the remaining earned shares subject to the award vesting equally over the following eight quarters of the named executive officer’s continuous service.
|
|
|
(7)
|
25,000 options vest monthly, measured from the vesting commencement date, subject to the named executive officer’s continuous service.
|
|
|
(8)
|
1/12th of the total shares subject to this option award vest monthly measured from the vesting commencement date, subject to the named executive officer’s continuous service.
|
|
|
(9)
|
1/5th of the shares vest on each of April 5, 2019, July 5, 2019, October 5, 2019, January 5, 2020, and April 5, 2020.
|
|
|
(10)
|
20,833 shares vested on February 1, 2018 with the remaining 479,167 options vesting in 23 equal monthly installments, subject to Mr. Hatfield's continuous service.
|
|
|
(11)
|
1/10th of the total shares subject to this option award vest monthly measured from the vesting commencement date, subject to the named executive officer’s continuous service.
|
|
|
(12)
|
1/24th of the total shares subject to this option award vest monthly measured from the vesting commencement date, subject to the named executive officer’s continuous service.
|
|
|
(13)
|
All of the shares vest on April 5, 2019 subject to Mr. Riitter's continuous service.
|
|
|
(14)
|
1/4th of the total shares subject to this award vest quarterly over one year measured from the vesting commencement date, subject to the named executive officer’s continuous service.
|
STOCK AWARDS VESTED AND OPTIONS EXERCISED IN FISCAL 2019
The following table summarizes the value realized by our named executive officers due to the vesting of stock awards and the exercise of stock option awards during fiscal 2019.
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Option Awards
|
Name
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized
on Vesting
($)
(1)
|
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized
on Exercise
($)
(2)
|
|
Charles Giancarlo
|
145,232
|
|
3,697,611
|
|
|
—
|
|
—
|
|
John Colgrove
|
54,233
|
|
1,129,875
|
|
|
—
|
|
—
|
|
David Hatfield
|
154,233
|
|
3,912,875
|
|
|
510,907
|
|
11,223,190
|
|
Timothy Riitters
|
201,429
|
|
4,550,903
|
|
|
146,500
|
|
1,801,277
|
|
|
|
(1)
|
The value realized on vesting is calculated as the number of vested shares multiplied by the closing market price of our common stock on the vesting date.
|
|
|
(2)
|
The value realized on exercise is calculated as the difference between the actual sales price of the shares of our common stock underlying the options exercised and the applicable exercise price of those options, multiplied by the number of exercised shares.
|
EMPLOYMENT, SEVERANCE AND CHANGE IN CONTROL AGREEMENTS
OFFER LETTERS
We have employment offer letters with each of our named executive officers, other than Mr. Colgrove. The offer letters generally provide for “at-will” employment and set forth the named executive officer’s initial base salary, initial equity grant amount, eligibility for employee benefits and in some cases severance payments and benefits upon a qualifying termination of employment. In addition, each of our named executive officers has executed our standard proprietary information and inventions agreement. The key terms of employment with our named executive officers are described below. Please see “Outstanding Equity Awards as of January 31, 2019” above for a presentation of equity awards held by our executive officers.
CHARLES GIANCARLO
In August 2017, we entered into an offer letter agreement with Mr. Giancarlo, our Chief Executive Officer and Chairman. Mr. Giancarlo’s current annual base salary is $520,000. Mr. Giancarlo is eligible to earn a bonus with an annual target of 100% of his annual base salary to be paid in semi-annual installments based on the achievement of corporate performance objectives, as determined by our compensation committee.
If Mr. Giancarlo is terminated without cause (as defined in his employment agreement) or Mr. Giancarlo resigns for good reason (as defined in his employment agreement), Mr. Giancarlo will be eligible to receive (i) continuation of his base salary for a period of 12 months following his termination and (ii) reimbursement of COBRA payments for a period of 18 months following his termination (or if earlier upon him obtaining health care coverage from another source). If Mr. Giancarlo is terminated without cause or Mr. Giancarlo resigns for good reason during the period beginning three months prior to a change in control (as defined in his employment agreement) and ending 12 months following the closing of such change in control, then, in lieu of the foregoing severance payments and benefits, he will be eligible to receive (i) an amount of cash severance equal to 12 months of his base salary plus his then target annual bonus amount, paid in a single lump sum on the 60th day following his termination, (ii) reimbursement of COBRA payments for a period of 18 months following his termination (or if earlier upon him obtaining health care coverage from another source) and (ii) the vesting of his equity awards will accelerate in full. Mr. Giancarlo must sign a release of claims agreement in favor of the company as a pre-condition of receiving these termination payments and benefits.
JOHN COLGROVE
Mr. Colgrove’s current annual base salary is $350,000. Effective March 1, 2019, Mr. Colgrove is eligible to earn a bonus with an annual target of $350,000 to be paid in semi-annual installments based on the achievement of corporate performance objectives, as determined by our compensation committee.
If Mr. Colgrove’s employment is terminated without cause or he terminates his employment for good reason on or within 18 months following a change in control of the company, all unvested shares of stock subject to his outstanding stock option awards will immediately become fully vested.
DAVID HATFIELD
In November 2012, we entered into an offer letter agreement with Mr. Hatfield, our President. Mr. Hatfield’s current annual base salary is $380,000. Effective March 1, 2019, Mr. Hatfield is eligible to earn a bonus with an annual target of $380,000 to be paid in semi-annual installments based on the achievement of corporate performance objectives, as determined by our compensation committee.
Pursuant to the terms of his offer letter, if Mr. Hatfield’s employment is terminated without cause or he terminates his employment for good reason, and other than as result of his death or disability, he will be eligible to receive certain severance payments and benefits, the conditions of which vary depending on whether such termination occurs in connection with a change in control of the company. If termination of employment occurs absent a change in control, Mr. Hatfield will be eligible to receive continuation of his base salary and reimbursement of COBRA payments for a period of nine months and vesting of 25% of the then-unvested shares subject to any then-outstanding stock option awards. If termination of employment occurs on or within 18 months following a change in control, Mr. Hatfield will be eligible to receive the base salary and COBRA payments as described in the preceding sentence and vesting of all of the then-unvested shares subject to any then outstanding stock option awards. Mr. Hatfield must sign a release of claims agreement in favor of the company as a pre-condition of receiving these termination payments and benefits.
TIMOTHY RIITTERS
In August 2014, we entered into an offer letter agreement with Mr. Riitters, our Chief Financial Officer. Mr. Riitters’ current annual base salary is $380,000. Effective March 1, 2019, Mr. Riitters is eligible to earn a bonus with an annual target of $266,000 to be paid in semi-annual installments based on the achievement of corporate performance objectives, as determined by our compensation committee.
Pursuant to the terms of his offer letter, if Mr. Riitters’ employment is terminated without cause or if he terminates his employment for good reason, and other than as a result of his death or disability, he will be eligible to receive certain severance payments and benefits, the conditions of which vary depending on whether such termination occurs in connection with a change in control of the company. If termination of employment occurs absent a change in control, Mr. Riitters will be eligible to receive continuation of his base salary and reimbursement of COBRA payments for a period of nine months and he will continue to vest in his option for six months after the date of such termination. If termination of employment occurs on or within 12 months following a change in control, Mr. Riitters will be eligible to receive the base salary and COBRA payments as described in the preceding sentence and vesting of all of the then-unvested shares subject to any then outstanding stock option awards. Mr. Riitters must sign a release of claims agreement in favor of the company as a pre-condition of receiving these termination payments and benefits.
CHANGE IN CONTROL SEVERANCE BENEFIT PLAN
In September 2015, we adopted a Change in Control Severance Benefit Plan (the
Severance Plan
). Employees with the title of vice president or above, including each of our named executive officers, are eligible participants under the Severance Plan. Under the Severance Plan, each eligible participant who suffers an involuntary termination of employment within the period starting three months prior to a change in control of the company and ending on the 12-month anniversary of the change in control, will receive (i) a lump sum cash payment equal to six months of the participant’s then-current base salary, (ii) a lump sum cash payment equal to six months of the participant’s then-current annual target bonus, (iii) up to six months of company-paid health insurance coverage, and (iv) accelerated vesting of 100% of the shares subject to each time-based vesting equity award held by such participant. These payments and benefits are subject to a “best after tax” provision in the case the case they would trigger excise tax penalties and loss of deductibility under Sections 280G and 4999 of the Code.
If an employee is an eligible participant and otherwise eligible to receive severance payments and benefits under the Severance Plan that are of the same category and would otherwise duplicate the payments and benefits available under the terms of any other agreement the participant has with us, the participant will receive severance payments and benefits under such other agreement in lieu of any Severance Plan benefits to the extent such benefits are duplicative, and severance payments and benefits will be provided under the Severance Plan only to the extent, if any, that Severance Plan benefits are not duplicative benefits. For instance, Mr. Giancarlo is eligible to participate in the Severance Plan, provided that he will still receive any more favorable terms under his employment agreement, such as his longer 18 months of company-paid health insurance coverage.
ACCELERATION UPON DEATH OR DISABILITY
In September 2015, our compensation committee amended all outstanding stock option awards to provide that if an employee dies while in a service relationship with us, all options held by the employee would vest and become exercisable in their entirety, and determined that the award agreement for all other stock awards would provide for full acceleration of the stock award in the event of the death of the employee while in a service relationship with us. Pursuant to such award terms, each of Messrs. Giancarlo, Colgrove, Hatfield and Riitters would receive full acceleration of any time-based equity awards in the event of his death as of January 31, 2019, for an aggregate value of $24,120,703, $9,685,582, $8,588,154 and $8,269,629, respectively, based on the closing market price of our common stock on January 31, 2019, which was $17.91 per share, and assuming full vesting of the performance-based RSU awards that were determined to have been earned at 108% for fiscal 2019, and Mr. Giancarlo’s new hire performance RSU award that was determined to have been earned at 104.65% for fiscal 2019.
POTENTIAL PAYMENTS UPON TERMINATION OR RESIGNATION
The following table provides an estimate of the value of the payments and benefits due to each of our named executive officers assuming a termination of employment without cause or if he terminates his employment for good reason, effective as of January 31, 2019, other than in connection with a change of control of the company, under the agreements described above. The actual amounts to be paid can only be determined at the time of such event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Equity Awards
($)
(1)
|
|
Name
|
Cash Payment
($)
|
|
Benefit Continuation
($)
|
|
Restricted
Stock Units
|
|
Restricted
Stock Awards
|
|
Options
|
|
Total
($)
|
|
Charles Giancarlo
(2)
|
500,000
|
|
43,594
|
|
—
|
|
—
|
|
—
|
|
543,594
|
|
John Colgrove
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
David Hatfield
(3)
|
273,750
|
|
18,396
|
|
—
|
|
—
|
|
1,126,813
|
|
1,418,959
|
|
Timothy Riitters
(3)
|
270,000
|
|
18,396
|
|
—
|
|
—
|
|
674,141
|
|
962,537
|
|
|
|
(1)
|
Based on the closing market price of our common stock on January 31, 2019, which was $17.91, per share.
|
|
|
(2)
|
Reflects a cash payment equal to 12 months of Mr. Giancarlo’s then-current base salary and 18 months of company-paid health insurance coverage.
|
|
|
(3)
|
Reflects continuation of base salary and reimbursement of health insurance payments for nine months, as well as vesting of 25% of the then-unvested shares subject to any then-outstanding stock options with respect to Mr. Hatfield and vesting of his original option for an additional six months with respect to Mr. Riitters.
|
POTENTIAL PAYMENTS UPON TERMINATION OR RESIGNATION IN CONNECTION WITH A CHANGE OF CONTROL
The following table provides an estimate of the value of the payments and benefits due to each of our named executive officers assuming a termination of employment without cause or if he terminates his employment for good reason, effective as of January 31, 2019, in connection with a change of control of the company, under the agreements and the Severance Plan described above. The actual amounts to be paid can only be determined at the time of such event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Equity Awards
($)
(1)
|
|
Name
|
Cash Payment
($)
|
|
Benefit Continuation
($)
|
|
Restricted
Stock Units
|
|
Restricted
Stock Awards
|
|
Options
|
|
Total
($)
|
|
Charles Giancarlo
(2)
|
1,000,000
|
|
43,594
|
|
21,146,065
|
|
—
|
|
1,931,044
|
|
24,120,703
|
|
John Colgrove
(3)
|
292,500
|
|
12,264
|
|
3,592,485
|
|
—
|
|
5,788,333
|
|
9,685,582
|
|
David Hatfield
(3)
|
456,250
|
|
18,396
|
|
3,606,258
|
|
—
|
|
4,507,250
|
|
8,588,154
|
|
Timothy Riitters
(3)
|
396,000
|
|
18,396
|
|
5,158,669
|
|
—
|
|
2,696,564
|
|
8,269,629
|
|
|
|
(1)
|
Based on the closing market price of our common stock on January 31, 2019, which was $17.91, per share.
|
|
|
(2)
|
Reflects a cash payment equal to 12 months of Mr. Giancarlo’s then-current base salary, a lump sum cash payment equal to 12 months of Mr. Giancarlo’s then-current annual target bonus, and 18 months of company-paid health insurance coverage, as well as vesting of all shares subject to all outstanding equity awards (including performance-based equity awards to Mr. Giancarlo granted upon his hire and during fiscal 2019 that were determined to have been earned at 104.65% and 108%, respectively, for fiscal 2019) held by Mr. Giancarlo.
|
|
|
(3)
|
Reflects a lump sum cash payment equal to six months of the named executive officer’s then-current base salary, a lump sum cash payment equal to six months of the named executive officer’s then-current annual target bonus, and six months of company-paid health insurance coverage, as well as vesting of all shares subject to each outstanding time-based vesting equity award held by such officer (including performance-based equity awards that were determined to have been earned at 108% for fiscal 2019), except that Messrs. Hatfield and Riitters are eligible to receive continuation of base salary and reimbursement of health insurance payments for an additional three months.
|
PAY RATIO
Pure Storage is required to disclose the ratio of our CEO’s annual total compensation to the annual total compensation of its median employee, referred to as “pay ratio” disclosure. To identify our median employee, we identified our total employee population as of December 31, 2018, other than our CEO. We compared the total of each employee’s aggregate salary, hourly pay, bonus and other cash compensation (such as on-call or overtime pay) actually paid, and the value of stock awards vested during calendar 2018, as reflected in our payroll records. We did not annualize the compensation of employees who were employed for less than the entire fiscal year.
Using this approach, we determined that the employee at the median had anomalous compensation characteristics, as that employee was only employed for part of calendar 2018, received a large new hire equity award, and was paid, in part, on a fiscal-year commission plan, which caused compensation during calendar 2018 to differ significantly as compared to compensation during fiscal 2019. As a result, we instead selected a substitute employee with substantially similar compensation in calendar 2018 (using the same approach) to that of the originally identified employee. We then calculated annual total compensation for the selected employee using the same methodology used to calculate annual total compensation for our CEO as set forth in the “Summary Compensation Table” above.
For fiscal 2019, the median of the annual total compensation of all employees of Pure Storage (other than our CEO), based on the selected employee, was $223,393, and based on the annual total compensation for our CEO of $8,383,230, our ratio of CEO pay to median employee pay was 38 to 1. The amounts included in the above pay ratio calculation take into account the grant date value of equity awards granted during fiscal 2019.
The pay ratio above represents Pure Storage’s reasonable estimate calculated in a manner consistent with the SEC rules, which allow for significant flexibility in how companies identify the median employee, and each company may use a different methodology and make different assumptions particular to that company. As a result, and as explained by the SEC when it adopted the pay ratio rules, the ratio was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand our compensation practices and pay-ratio disclosures.
STOCK OWNERSHIP INFORMATION
SECURITY OWNERSHIP
The following table sets forth, as of March 31, 2019, certain information with respect to the beneficial ownership of our common stock: (a) by each person known by us to be the beneficial owner of more than five percent of the outstanding shares of common stock, (b) by each of our directors, (c) by each of our named executive officers, and (d) by all of our current executive officers and directors as a group.
The percentage of shares beneficially owned shown in the table is based on 243,523,831 shares of common stock outstanding as of March 31, 2019. In computing the number of shares of capital stock beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares of our capital stock subject to options held by the person that are currently exercisable or exercisable within 60 days of March 31, 2019. However, we did not deem such shares of our capital stock outstanding for the purpose of computing the percentage ownership of any other person.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown beneficially owned by them, subject to applicable community property laws. The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares.
Except as otherwise noted below, the address for persons listed in the table is c/o Pure Storage, Inc., 650 Castro Street, Suite 400, Mountain View, California 94041.
|
|
|
|
|
|
Name of Beneficial Owner
|
Shares Beneficially Owned
|
|
%
|
|
Executive Officers:
|
|
|
Charles Giancarlo
(1)
|
1,898,863
|
|
*
|
|
John Colgrove
(2)
|
14,252,159
|
|
5.7
|
|
David Hatfield
(3)
|
1,825,048
|
|
*
|
|
Timothy Riitters
(4)
|
1,428,293
|
|
*
|
|
Directors:
|
|
|
Scott Dietzen
(5)
|
4,512,082
|
|
1.8
|
|
Mark Garrett
(6)
|
248,934
|
|
*
|
|
Jeff Rothschild
|
7,518
|
|
*
|
|
Anita Sands
(7)
|
131,934
|
|
*
|
|
Frank Slootman
(8)
|
555,601
|
|
*
|
|
Mike Speiser
(9)
|
106,383
|
|
*
|
|
Susan Taylor
|
—
|
|
*
|
|
Roxanne Taylor
|
—
|
|
*
|
|
All directors and executive officers as a group (12 persons)
(10)
|
24,966,815
|
|
10.0
|
|
5% Stockholders:
|
|
|
Vanguard Group
(11)
|
18,436,533
|
|
7.3
|
|
Entities affiliated with FMR LLC
(12)
|
16,301,430
|
|
6.5
|
|
|
|
(1)
|
Consists of 1,461,363 shares of Class A Common Stock held by Mr. Giancarlo, of which 1,198.920 shares are unvested and subject to our right of repurchase. Also includes 437,500 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(2)
|
Consists of 13,817,315 shares of Class A Common Stock, of which (i) 290,811 shares are unvested and subject to our right of repurchase, (ii) 2,250,000 shares are held by Eric Edward Colgrove Irrevocable Trust DTD Feb 8, 2011, Jeff Rothschild TTEE; (iii) 2,250,000 shares are held by Richard Winston Colgrove Irrevocable Trust DTD Feb 8, 2011, Jeff Rothschild TTEE; (iv) 1,553,926 shares are held by the Colgrove Family Living
|
STOCK OWNERSHIP INFORMATION
Trust, over which Mr. Colgrove shares voting and dispositive power; and (v) 7,572,613 shares are held directly by Mr. Colgrove. Also includes 334,809 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
(3)
|
Consists of 644,004 shares of Class A common stock, of which (i) 290,811 shares are unvested and subject to our right of repurchase, (ii) 18,666 shares are held by DMH 2013 Irrevocable Trust, 18,666 shares are held by JHH 2013 Irrevocable Trust, and 18,666 shares are held by KGH 2013 Irrevocable Trust, over which Mr. Hatfield has voting and dispositive power; (iii) 24,375 shares held by DM Hatfield & JM Hatfield Co-TTEE The Hatfield Family Trust U/A DTD 3/10/2000, and (iv) 372,855 shares are held directly by Mr. Hatfield. Also includes 1,081,009 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(4)
|
Consists of 460,332 shares of Class A Common Stock held by Mr. Riitters, of which 368,193 shares are unvested and subject to our right of repurchase. Also includes 967,961 shares that are issuable pursuant to equity awards which are vested or will vest with 60 days of March 31, 2019.
|
|
|
(5)
|
Consists of 4,502,273 shares of Class A Common Stock, of which (i) 39,233 shares are unvested and subject to our right of repurchase, (ii) 3,481,083 shares are held by Scott Dietzen and Katherine Dietzen, Co-Trustees of the Dietzen Living Trust, dated January 16, 2009, over which Dr. Dietzen shares voting and dispositive power; (ii) 800,000 shares are held by JP Morgan Trust Company of Delaware, as Trustee of the Dietzen Family 2014 Irrevocable Trust GST Exempt Trust under agreement dated March 25, 2014, over which Dr. Dietzen shares voting and dispositive power. Also includes 9,809 shares that are issuable pursuant to equity awards that are vested or will vest within 60 days of March 31, 2019.
|
|
|
(6)
|
Consists of 15,601 shares of Class A Common Stock held by Mr. Garrett. Also includes 233,333 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(7)
|
Consists of 601 shares of Class A Common Stock held by Dr. Sands. Also includes 131,333 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(8)
|
Consists of 15,601 shares of Class A Common Stock held by Mr. Slootman. Also includes 540,000 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(9)
|
Consists of 106,383 shares of Class A Common Stock, of which (i) 43,800 shares are held by Wells Fargo Bank, N.A. FBO SHV Profit Sharing Plan FBO Michael L. Speiser, a retirement trust for the benefit of Mr. Speiser, (ii) 40,982 shares are held by Speiser Trust, of which Mr. Speiser is a trustee, (iii) 6,000 shares are held by Wells Fargo Bank, N.A. FBO Michael L. Speiser Roth IRA, Mr. Speiser’s Roth IRA account.
|
|
|
(10)
|
Includes 2,087,933 shares of Class A Common Stock that are unvested and subject to our right of repurchase and 3,735,754 shares that are issuable pursuant to equity awards which are vested or will vest within 60 days of March 31, 2019.
|
|
|
(11)
|
Based on information contained in a schedule 13G/A filed on February 12, 2019, The Vanguard Group (Vanguard) beneficially owns 18,436,533 shares of common stock. Vanguard is located at 100 Vanguard Blvd, Malvern, PA 19355.
|
|
|
(12)
|
Based on information contained in a schedule 13G/A filed on February 13, 2019. FMR LLC is located at 245 Summer St, Boston, MA 02210.
|
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of Pure Storage’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of Pure Storage. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended January 31, 2019, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except that due to administrative oversight, David Hatfield failed to timely file a Form 4 with respect to three transactions, which involved (i) the exercise of 66,667 stock options and sale of 200,000 shares that occurred on February 20, 2018 and was reported on Form 4 on February 23, 2018, (ii) the exercise of 50,000 stock options and sale of 150,000 shares that occurred on May 18, 2018 and was reported on Form 4 on June 20, 2018, and (iii) the exercise of 114,245 stock options that occurred on September 18, 2018 and was reported on Form 5 on February 28, 2019.
STOCK OWNERSHIP INFORMATION
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes our equity compensation plan information as of January 31, 2019. Information is included for equity compensation plans approved by our stockholders. We do not have any equity compensation plans not approved by our stockholders.
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Plan Category
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(a) Number of Securities to
be Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(1)
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(b) Weighted Average Exercise
Price of Outstanding Options,
Warrants and Rights
(2)
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(c) Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected in
Column (a))
(3)
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Equity plans approved by stockholders
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57,383,093
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$8.34
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17,111,403
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Equity plans not approved by stockholders
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—
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—
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—
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(1)
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Includes our 2009 Equity Incentive Plan and 2015 Plan, but does not include future rights to purchase shares under our ESPP, which depend on a number of factors described in our ESPP.
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(2)
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The weighted average exercise price is calculated based solely on outstanding stock options, and excludes the shares of common stock included in column (a) that are issuable upon the vesting of 21,917,550 shares under stock awards then-outstanding under our 2015 Plan, which have no exercise price.
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(3)
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Includes our 2015 Plan and ESPP. Our 2015 Plan provides that the total number of shares of common stock reserved for issuance thereunder will be automatically increased, on February 1st of each calendar year, in an amount equal to 5% of the total number of shares of our capital stock outstanding on the last day of the calendar month prior to the date of each automatic increase, or a lesser number of shares determined by our board of directors. Our ESPP provides that the number of shares of common stock available for issuance thereunder is automatically increased on February 1st of each calendar year by the lesser of (i) 1% of the total number of shares of our common stock outstanding on the last day of the calendar month prior to the date of the automatic increase, and (ii) 3,500,000 shares; provided that our board of directors may determine that such increase will be less than the amount set forth above. Accordingly, on February 1, 2019, the number of shares of common stock available for issuance under our 2015 Plan and ESPP increased by 12,176,191 shares and 2,435,238 shares, pursuant to these provisions. These increases are not reflected in the table above.
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QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why did I receive a notice regarding the availability of proxy materials on the internet?
Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the internet. Accordingly, we have sent you a
Notice of Internet Availability of Proxy Materials
(the
Notice
) because our board of directors is soliciting your proxy to vote at the 2019 annual meeting of stockholders, including at any adjournments or postponements thereof. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or to request a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.
We intend to mail the Notice on or about May 8, 2019 to all stockholders of record.
How do I attend and participate in the annual meeting online?
We will be hosting the meeting via live webcast only. Any stockholder of record can attend the meeting live online at
www.virtualshareholdermeeting.com/PSTG2019
. The webcast will start at 10:00 a.m. Pacific Time on June 20, 2019. Stockholders may vote and submit questions while attending the meeting online. The webcast will open 15 minutes before the start of the meeting. In order to enter the meeting, you will need the control number, which is included in the Notice or on your proxy card if you are a stockholder of record of shares of common stock, or included with your voting instruction card and voting instructions received from your broker, bank or other agent if you hold your shares of common stock in a “street name.” Instructions on how to attend and participate online are available at
www.virtualshareholdermeeting.com/PSTG2019
.
Who can vote at the meeting?
Only stockholders of record at the close of business on April 25, 2019 will be entitled to vote at the meeting. On this record date, there were 252,830,075 shares of common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If, on April 25, 2019, your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote online during the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If, on April 25, 2019, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the virtual annual meeting. Since you are not the stockholder of record, you may vote your shares online during the meeting only by following the instructions from your broker, bank or other agent.
What am I voting on?
There are four matters scheduled
for
a vote:
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Election of three Class I directors to hold office until our 2022 annual meeting of stockholders;
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•
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Ratification of the selection of Deloitte & Touche as our independent registered public accounting firm for the fiscal year ending January 31, 2020;
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•
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Approval of an amendment of our ESPP; and
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Approval, on an advisory basis, of the compensation of our named executive officers, as described in this proxy statement.
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What if another matter is properly brought before the meeting?
Our board of directors knows of no other matters that will be presented for consideration at the meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
How do I vote?
The procedures for voting are fairly simple as follows:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote online during the meeting, vote by proxy through the internet, vote by proxy over the telephone, or vote by proxy using a proxy card that you may request. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. Even if you have submitted a proxy before the meeting, you may still attend online and vote during the meeting. In such case, your previously submitted proxy will be disregarded.
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To vote online during the meeting, follow the provided instructions to join the meeting at
www.virtualshareholdermeeting.com/PSTG2019
, starting at 9:45 a.m. PT on June 20, 2019.
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To vote online before the meeting, go to
www.proxyvote.com
.
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To vote by telephone, call 1-800-690-6903.
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To vote by mail, simply complete, sign and date the proxy card or voting instruction card, and return it promptly in the envelope provided.
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If we receive your vote by internet or phone or your signed proxy card up until 11:59 p.m. Eastern Time the day before the 2019 annual meeting of stockholders, we will vote your shares as you direct. To vote, you will need the control number in the Notice, on your proxy card or in the instructions that accompanied the proxy materials.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a Notice containing voting instructions from that organization rather than from us. Simply follow the voting instructions in the Notice to ensure that your vote is counted. To vote online during the meeting, you must follow the instructions from your broker, bank or other agent.
Can I change my vote after submitting my proxy?
Yes. If you are a record holder of shares, you may revoke, subject to the voting deadlines above, your proxy by:
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Submitting another properly completed proxy card with a later date;
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Granting a subsequent proxy by telephone or through the internet;
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Sending a timely written notice that you are revoking your proxy to our Secretary at 650 Castro Street, Mountain View, California 94041; or
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Attending and voting online during the meeting. Simply attending the meeting will not, by itself, revoke your proxy.
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If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by such party.
What happens if I do not vote?
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record and do not vote online during the meeting, through the internet, by telephone or by completing your proxy card, your shares will not be voted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner and do not instruct your broker, bank or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the NYSE deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation, and certain corporate governance proposals, even if management-supported. Accordingly, your broker or nominee may not vote your shares on Proposals 1 or 3 without your instructions, but may vote your shares on Proposal 2 even in the absence of your instruction.
Please instruct your bank, broker or other agent to ensure that your vote will be counted.
What if I return a proxy card or otherwise vote but do not make specific choices?
If you return a signed and dated proxy card or otherwise vote, your shares will be voted
FOR
the election each of the nominees for Class I director,
FOR
the ratification of the selection of Deloitte & Touche as our independent registered public accounting firm,
FOR
the approval of the amendment to our ESPP and
FOR
the advisory approval of named executive officer compensation. If any other matter is properly presented at the meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his best judgment.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
How many votes do I have?
Each holder of common stock will have the right to one vote per share.
How many votes are needed to approve each proposal?
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Proposal 1:
The three nominees for Class I directors that receive the highest number of
FOR
votes will be elected. Only votes “For” will affect the outcome.
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Proposal 2:
The ratification of the selection of our independent registered public accounting firm must receive
FOR
votes from the holders of a majority in voting power of the shares present at the meeting or represented by proxy and entitled to vote on the proposal.
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•
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Proposal 3:
The amendment of our 2015 Employee Stock Purchase Plan to increase the number of shares available for issuance by 5,000,000 shares must receive
FOR
votes from the majority of the shares present in person or represented by proxy and entitled to vote on the proposal.
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•
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Proposal 4:
The advisory approval of the compensation of our named executive officers must receive
FOR
votes from the holders of a majority in voting power of the shares present at the meeting or represented by proxy and entitled to vote on the proposal.
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What are “broker non-votes”?
As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.”
How are broker non-votes and abstentions treated?
If your shares of common stock are held by a broker on your behalf, and you do not instruct the broker as to how to vote these shares on Proposal 2, the broker may exercise its discretion to vote for or against that proposal in the absence of your instruction. With respect to Proposals 1, 3 and 4, the broker may not exercise discretion to vote on those proposals. Such event would constitute a “broker non-vote,” and these shares will not be counted as having been voted on the applicable proposal. However, broker non-votes will be considered present and entitled to vote at the meeting and will be counted in determining whether or not a quorum is present. Please instruct your broker so your vote can be counted.
If stockholders abstain from voting, the applicable shares of common stock will be considered present and entitled to vote at the meeting and will be counted in determining whether or not a quorum is present. With respect to Proposal 1, abstentions are not considered votes cast
FOR
or
AGAINST
a nominee’s election and will have no effect in determining whether a nominee for director has received sufficient votes. With respect to Proposal 2, 3 and 4, abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and will have the same effect as voting against the proposal.
Who counts the votes?
We have engaged Broadridge Financial Solutions as our independent agent to tabulate stockholder votes. If you are a stockholder of record, and you choose to vote over the internet (either prior to or during the meeting) or by telephone, Broadridge will access and tabulate your vote electronically, and if you choose to sign and mail your proxy card, your executed proxy card is returned directly to Broadridge for tabulation. As noted above, if you hold your shares through a broker, your broker (or its agent for tabulating votes of shares held in street name, as applicable) returns one proxy card to Broadridge on behalf of all its clients.
Who is paying for this proxy solicitation?
We will pay for the cost of soliciting proxies. Please be aware that you must bear any costs associated with your internet access. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid additional compensation for soliciting proxies. We may reimburse brokers, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one Notice?
If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the instructions on the Notices to ensure that all your shares are voted.
When are stockholder proposals due for next year’s annual meeting?
To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by January 8, 2020, to our Secretary at 650 Castro Street, Suite 400, Mountain View, California 94041; provided that if the date of next year’s meeting is earlier than May 21, 2020 or later than July 20, 2020, the deadline will be a reasonable time before we begin to print and send our proxy materials for next year’s meeting. If you wish to nominate a director or submit a proposal that you do not desire to be included in next year’s proxy materials, you must do so between February 21, 2020 and March 22, 2020; provided that if the date
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
of that annual meeting of stockholders is earlier than May 21, 2020 or later than July 20, 2020, you must give the required notice not earlier than the 120th day prior to the meeting date and not later than the 90th day prior to the meeting date or, if later, the 10th day following the day on which public disclosure of that meeting date is first made. You are also advised to review our amended and restated bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the aggregate voting power of the shares of common stock entitled to vote at the meeting are present at the meeting or represented by proxy.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote during the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of the aggregate voting power of shares present at the meeting or represented by proxy may adjourn the meeting to another date.
How can I find out the results of the voting at the annual meeting?
We expect that preliminary voting results will be announced during the meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the meeting.
What does it mean if multiple members of my household are stockholders but we only received one Notice or full set of proxy materials in the mail?
The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for notices and proxy materials with respect to two or more stockholders sharing the same address by delivering a single Notice or set of proxy materials addressed to those stockholders. In accordance with a prior notice sent to certain brokers, banks, dealers or other agents, we are sending only one Notice or full set of proxy materials to those addresses with multiple stockholders unless we received contrary instructions from any stockholder at that address. This practice, known as “householding,” allows us to satisfy the requirements for delivering Notices or proxy materials with respect to two or more stockholders sharing the same address by delivering a single copy of these documents. Householding helps to reduce our printing and postage costs, reduces the amount of mail you receive and helps to preserve the environment. If you currently receive multiple copies of the Notice or proxy materials at your address and would like to request “householding” of your communications, please contact your broker. Once you have elected “householding” of your communications, “householding” will continue until you are notified otherwise or until you revoke your consent by notifying your broker. To make a change regarding the format of your proxy materials (electronically or in print), or to request receipt of a separate set of documents to a household, contact us through our website at
investor.purestorage.com
, or by mail at 650 Castro Street, Mountain View, California 94041
Our board of directors knows of no other matters that will be presented for consideration at the virtual annual meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the associated proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
CHARLES GIANCARLO
Chairman and Chief Executive Officer
Mountain View, California
May 8, 2019
We have filed our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 with the SEC. It is available free of charge at the SEC’s web site at
www.sec.gov
. Stockholders can also access this proxy statement and our Annual Report on Form 10-K at
investor.purestorage.com
, or a copy of our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 is available without charge upon written request to our Secretary at 650 Castro Street, Mountain View, California 94041.
APPENDIX A
PURE STORAGE, INC.
AMENDED AND RESTATED
2015 EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors: August 19, 2015
Approved by the Stockholders: August 31, 2015
IPO Date / Effective Date: October 7, 2015
Amended by the Board of Directors: February 26, 2019
1.
GENERAL; PURPOSE.
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(a)
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The Plan provides a means by which Eligible Employees of the Company and certain Designated Companies may be given an opportunity to purchase shares of Common Stock. The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan.
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(b)
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The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations and Affiliates.
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(c)
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The Plan includes two components: a 423 Component and a Non-423 Component. The Company intends (but makes no undertaking or representation to maintain) the 423 Component to qualify as an Employee Stock Purchase Plan. The provisions of the 423 Component, accordingly, will be construed in a manner that is consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes grants of Purchase Rights under the Non-423 Component that do not meet the requirements of an Employee Stock Purchase Plan. Except as otherwise provided in the Plan or determined by the Board, the Non-423 Component will operate and be administered in the same manner as the 423 Component. In addition, the Company may make separate Offerings which vary in terms (provided that such terms are not inconsistent with the provisions of the Plan or the requirements of an Employee Stock Purchase Plan), and the Company will designate which Designated Company is participating in each separate Offering.
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2.
ADMINISTRATION.
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(a)
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The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
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(b)
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The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
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(i)
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To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).
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(ii)
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To designate from time to time which Related Corporations of the Company will be eligible to participate in the Plan as Designated 423 Corporations or as Designated Non-423 Corporations, which Affiliates may be excluded from participation in the Plan, and which Designated Companies will participate in each separate Offering (to the extent that the Company makes separate Offerings).
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(iii)
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To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.
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(iv)
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To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.
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(v)
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To suspend or terminate the Plan at any time as provided in Section 12.
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(vi)
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To amend the Plan at any time as provided in Section 12.
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(vii)
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Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company, its Related Corporations, and Affiliates and to carry out the intent that the 423 Component be treated as an Employee Stock Purchase Plan.
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(viii)
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To adopt such rules, procedures and sub-plans relating to the operation and administration of the Plan as are necessary or appropriate under applicable local laws, regulations and procedures to permit or facilitate participation in the Plan by Employees who are foreign nationals or employed or located outside the United States. Without limiting the generality of, but consistent with, the foregoing, the Board specifically is authorized to adopt rules, procedures, and sub-plans, which, for purposes of the Non-423 Component, may be beyond the scope of Section 423 of the Code, regarding, without limitation, eligibility to participate in the Plan, handling and making of Contributions, establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of share issuances, any of which may vary according to applicable requirements.
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(c)
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The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.
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(d)
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All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
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3.
SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
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(a)
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Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed
8,500,000
3,500,000
shares of Common Stock, plus the number of shares of Common Stock that are automatically added commencing on February 1 of each year for a period of up to ten years, commencing on February 1 in the calendar year following the calendar year in which the IPO Date occurs and ending on (and including) February 1, 2025, in an amount equal to the lesser of (i) 1% of the total number of shares of Capital Stock outstanding on the last day of the calendar month prior to the date of such automatic increase, and (ii) 3,500,000 shares of Common Stock. Notwithstanding the foregoing, the Board may act prior to the first day of any fiscal year to provide that there will be no February 1st increase in the share reserve for such fiscal year or that the increase in the share reserve for such fiscal year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.
Pursuant to this provision, the share reserve has previously been automatically increased by 1,905,094 shares, 2,043,637 shares, 2,209,789 shares and 2,435,238 shares, effective on each of February 1, 2016, 2017, 2018 and 2019, respectively.
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(b)
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If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.
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(c)
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The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.
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4.
GRANT OF PURCHASE RIGHTS; OFFERING.
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(a)
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The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and, with respect to the 423 Component, will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the Offering Document or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.
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(b)
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If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in forms delivered to the Company: (i) each form will apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier- granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.
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(c)
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The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.
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5.
ELIGIBILITY.
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(a)
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Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation or an Affiliate. Except as provided in Section 5(b), an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company, a Related Corporation, or an Affiliate, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event will the required period of continuous employment be equal to or greater than two years. In addition, the Board may provide that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company, the Related Corporation, or the Affiliate, as applicable, is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.
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(b)
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The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering. Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:
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(i)
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the date on which such Purchase Right is granted will be the "Offering Date" of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;
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(ii)
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the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and
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(iii)
|
the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she will not receive any Purchase Right under that Offering.
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(c)
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No Employee will be eligible for the grant of any Purchase Rights if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.
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(d)
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As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations or Affiliates, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation or Affiliates to accrue at a rate which, when aggregated, exceeds US$25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.
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(e)
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Officers of the Company and any Designated Company, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.
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6.
PURCHASE RIGHTS; PURCHASE PRICE.
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(a)
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On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock (rounded down to the nearest whole share) purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 30% of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.
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(b)
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The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.
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(c)
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In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock (rounded down to the nearest whole share) available will be made in as nearly a uniform manner as will be practicable and equitable.
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(d)
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The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be not less than the lesser of:
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(i)
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an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; or
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(ii)
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an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.
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7.
PARTICIPATION; WITHDRAWAL; TERMINATION.
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(a)
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An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing and delivering to the Company, within the time specified in the Offering, an enrollment form provided by the Company or any third party designated by the Company (each, a "Company Designee"). The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where applicable laws or regulations require that Contributions be deposited with a Company Designee or otherwise be segregated. If permitted in the Offering, a Participant may begin such Contributions with the first payroll occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering). If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions. If required under applicable laws or regulations or if specifically provided in the Offering, in addition to or instead of making Contributions by payroll deductions, a Participant may make Contributions through a payment by cash, check, or wire transfer prior to a Purchase Date, in a manner directed by the Company or a Company Designee.
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(b)
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During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company or a Company Designee a withdrawal form provided by the Company. The Company may impose a deadline before a Purchase Date for withdrawing. Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute as soon as practicable to such Participant all of his or her accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate. A Participant’s withdrawal from that Offering will have no effect upon his or her eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.
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(c)
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Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason or (ii) is otherwise no longer eligible to participate. The Company will distribute as soon as practicable to such individual all of his or her accumulated but unused Contributions.
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(d)
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During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant. Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.
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(e)
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Unless otherwise specified in the Offering, the Company will have no obligation to pay interest on Contributions.
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8.
EXERCISE OF PURCHASE RIGHTS.
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(a)
|
On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock (rounded down to the nearest whole share), up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares will be issued unless specifically provided for in the Offering.
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(b)
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Unless otherwise provided in the Offering, if any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock on a Purchase Date in an Offering, then such remaining amount will be distributed to such Participant as soon as practicable after the applicable Purchase Date, without interest.
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(c)
|
No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable U.S. federal and state, foreign and other securities, exchange control and other laws applicable to the Plan. If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in
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such compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 6 months from the Offering Date. If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all applicable laws or regulations, as determined by the Company in its sole discretion, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed as soon as practicable to the Participants without interest.
9.
COVENANTS OF THE COMPANY.
The Company will seek to obtain from each U.S. federal or state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so would cause the Company to incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
10.
DESIGNATION OF BENEFICIARY.
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(a)
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The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant. The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company or as approved by the Company for use by a Company Designee.
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(b)
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If a Participant dies, in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant. If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions, without interest, to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
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11.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.
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(a)
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In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering. The Board will make these adjustments, and its determination will be final, binding and conclusive.
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(b)
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In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock (rounded down to the nearest whole share) within ten business days prior to the Corporate Transaction under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.
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12.
AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.
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(a)
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The Board may amend the Plan at any time in any respect the Board deems necessary or advisable. However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by applicable laws, regulations or listing requirements, including any amendment that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent stockholder approval is required by applicable laws, regulations, or listing requirements.
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(b)
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The Board may suspend or terminate the Plan at any time. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.
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(c)
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Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain any special tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the 423 Component complies with the requirements of Section 423 of the Code.
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13.
SECTION 409A OF THE CODE; TAX QUALIFICATION.
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(a)
|
Purchase Rights granted under the 423 Component are intended to be exempt from the application of Section 409A of the Code under U.S. Treasury Regulation Section 1.409A-1(b)(5)(ii). Purchase Rights granted under the Non-423 Component to U.S. taxpayers are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities will be construed and interpreted in accordance with such intent. Subject to Section 13(b) below, Purchase Rights granted to U.S. taxpayers under the Non-423 Component will be subject to such terms and conditions that will permit such Purchase Rights to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares subject to a Purchase Right be delivered within the short-term deferral period. Subject to Section 13(b) below, in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Board determines that a Purchase Right or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the Purchase Right will be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, including, without limitation, any such regulations or other guidance that may be issued after the adoption of the Plan. Notwithstanding the foregoing, the Company will have no liability to a Participant or any other party if the Purchase Right that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Board with respect thereto.
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(b)
|
Although the Company may endeavor to (i) qualify a Purchase Right for special tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain special or to avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 13(a) above. The Company will be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
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14.
EFFECTIVE DATE OF PLAN.
The Plan will become effective immediately prior to and contingent upon the IPO Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
15.
MISCELLANEOUS PROVISIONS.
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(a)
|
Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.
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(b)
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A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).
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(c)
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The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering will in any way alter the at-will nature of a Participant’s employment, if applicable, or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company, a Related Corporation, or an Affiliate, or on the part of the Company, a Related Corporation, or an Affiliate to continue the employment of a Participant.
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(d)
|
The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that state’s conflicts of laws rules.
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(e)
|
If any particular provision of the Plan is found to be invalid or otherwise unenforceable, such provision will not affect the other provisions of the Plan, but the Plan will be construed in all respects as if such invalid provision were omitted.
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(f)
|
If any provision of the Plan does not comply with applicable law or regulations, such provision shall be construed in such a manner as to comply with applicable law or regulations.
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16.
DEFINITIONS.
As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
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(a)
|
"423 Component" means the part of the Plan, which excludes the Non-423 Component, pursuant to which Purchase Rights that satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
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(b)
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"Affiliate" means any entity, other than a Related Corporation, in which the Company has an equity or other ownership interest or that is directly or indirectly controlled by, controls, or is under common control with the Company, in all cases, as determined by the Board, whether now or hereafter existing.
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(c)
|
"Board" means the Board of Directors of the Company.
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(d)
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"Capital Stock" means each and every class of common stock of the Company, regardless of the number of votes per share.
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(e)
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"Capitalization Adjustment" means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
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(f)
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"Code" means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
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(g)
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"Committee" means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).
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(h)
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"Common Stock" means, as of the IPO Date, the Class A Common Stock of the Company, having one vote per share.
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(i)
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"Company" means Pure Storage, Inc., a Delaware corporation.
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(j)
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"Contributions" means the payroll deductions and/or other payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if specifically provided for in the Offering, and then only if the Participant has not already contributed the maximum permitted amount of payroll deductions and/or other payments during the Offering.
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(k)
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"Corporate Transaction" means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
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(i)
|
a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
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(ii)
|
a sale or other disposition of at least 90% of the outstanding securities of the Company;
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(iii)
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a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
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(iv)
|
a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
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(l)
|
"Designated 423 Corporation" means any Related Corporation selected by the Board as participating in the 423 Component.
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(m)
|
"Designated Company" means any Designated Non-423 Corporation or Designated 423 Corporation, provided, however, that at any given time, a Related Corporation participating in the 423 Component shall not be a Related Corporation participating in the Non-423 Component.
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(n)
|
"Designated Non-423 Corporation" means any Related Corporation or Affiliate selected by the Board as participating in the Non-423 Component.
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(o)
|
"Director" means a member of the Board.
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(p)
|
"Eligible Employee" means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.
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(q)
|
"Employee" means any person, including an Officer or Director, who is treated as an employee in the records of the Company or a Related Corporation (including an Affiliate). However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an "Employee" for purposes of the Plan.
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(r)
|
"Employee Stock Purchase Plan" means a plan that grants Purchase Rights intended to be options issued under an "employee stock purchase plan," as that term is defined in Section 423(b) of the Code.
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(s)
|
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
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(t)
|
"Fair Market Value" means, as of any date, the value of the Common Stock determined as follows:
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(i)
|
If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in such source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.
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(ii)
|
In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith in compliance with applicable laws and regulations and in a manner that complies with Sections 409A of the Code.
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(iii)
|
Notwithstanding the foregoing, for any Offering that commences on the IPO Date, the Fair Market Value of the shares of Common Stock on the Offering Date will be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering.
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(u)
|
"IPO Date" means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.
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(v)
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"Non-423 Component" means the part of the Plan, which excludes the 423 Component, pursuant to which Purchase Rights that are not intended to satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
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(w)
|
"Offering" means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the "Offering Document" approved by the Board for that Offering.
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(x)
|
"Offering Date" means a date selected by the Board for an Offering to commence.
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(y)
|
"Officer" means a person who is an officer of the Company or a Related Corporation or Affiliate within the meaning of Section 16 of the Exchange Act.
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(z)
|
"Participant" means an Eligible Employee who holds an outstanding Purchase Right.
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(aa)
|
"Plan" means this Pure Storage, Inc. 2015 Employee Stock Purchase Plan, including both the 423 Component and the Non-423 Component, as amended from time to time.
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(bb)
|
"Purchase Date" means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.
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(cc)
|
"Purchase Period" means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.
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(dd)
|
"Purchase Right" means an option to purchase shares of Common Stock granted pursuant to the Plan.
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(ee)
|
"Related Corporation" means any "parent corporation" or "subsidiary corporation" of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
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(ff)
|
"Securities Act" means the U.S. Securities Act of 1933, as amended.
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(gg)
|
"Trading Day" means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the NYSE, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.
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